Merkel Ally Criticizes U.S. Sanctions-Busting Bank Fines

July 11 (Bloomberg) -- U.S. court settlements that imposed
fines on banks including BNP Paribas SA are “highly
questionable,” said Volker Bouffier, the premier of Germany’s
Hesse state and an ally of Chancellor Angela Merkel.

The settlements “seem arbitrary,” Bouffier, whose state
includes Frankfurt, Germany’s financial center, said in an
interview today. The Christian Democrat echoed criticism by
Ulrich Grillo, head of Germany’s BDI industry federation, who
suggested in a newspaper interview that the U.S. was seeking to
“starve” European banks to ease their takeover.

“One can have the feeling that legal concerns are not
central to the settlements,” Bouffier said in Berlin. “I
personally view the American sanctions system as highly
questionable, as almost arbitrary.”

His comments underscore trans-Atlantic strains from banking
to military drone orders as German authorities exposed two
alleged U.S. spies this month. Commerzbank AG, Germany’s second-biggest lender, will probably be the next bank to resolve
alleged U.S. sanctions violations, according to a person with
knowledge of the matter.

Bouffier said he advocates introducing international
arbitration to adjudicate sanctions cases. The move would create
common rules for settlements that are presently forged in lower
U.S. courts.

Frankfurt-based Commerzbank, which is 17 percent state-owned, may incur penalties of at least $500 million as part of a
deferred-prosecution agreement with authorities, a person
familiar with the matter said on July 8.

The U.S. has brought at least 22 cases against financial
firms since 2009, mostly overseas banks, for doing business or
handling funds linked to sanctioned countries such as Iran and
Cuba. A record $8.97 billion fine was imposed on BNP Paribas.
Deutsche Bank AG and Italy’s UniCredit SpA are among other
lenders being investigated by U.S. authorities.

Grillo, in an interview in Frankfurter Allgemeine Zeitung
today, said “it can’t be that America can weaken the European
financial system and at the end of it perhaps buys the one or
the other bank.”